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Gold Price Slips Again, Dollar Jumps

With investors again jumping head-first into the stock market, the precious metals saw some modest selling pressure on Tuesday morning. Spot gold traded down about $5 per ounce to about $1,220/oz, extending a slump that dates back to the beginning of last week. The silver price lost 2¢ to fall to $16.18/oz.

This followed very modest losses for gold and silver during Monday’s trading session. Platinum was the only precious metal that gained on Monday, adding $5 an ounce. On Tuesday morning, both the platinum price and palladium price were roughly 1.5% in the red, compared to just -0.15% for silver.

After more than a week of futures traders consistently dumping gold, there appeared to be some exhaustion among sellers that stanched the losses for the precious metals. However, without any boost in demand to stimulate the buy side of the trade, gold and silver have had nowhere to go but down. Even at $1,220/oz, gold is still 16% above its near-term low ($1,050/oz) from January of last year.

Risk-On

Due to improving sentiment on Wall St (and apparently Main St as well), investors have been shunning safer assets like gold in favor of moving money into the stock market. This atmosphere of “risk-on” (i.e. weak risk aversion) has also helped the U.S. dollar, which surged 0.5% to 99.6 on the DXY index.

The dollar rally alone accounted for much of gold’s losses on Tuesday. Another consequence of this optimism is heightened expectations for interest-rate increases from the Federal Reserve over the course of the next year or so. The private sector’s expectation for higher rates, an improved economy, and potential tax cuts promised by the Trump administration have all combined to brighten the outlook for many investors—for the time being. The S&P 500 and Nasdaq indices have hit all-time highs while volatility (as measured by the VIX index) has fallen to a 24-year low. Robust corporate earnings from the first quarter have also provided fuel to the rally, and many heavy hitters of the corporate world have still yet to report.

The financial markets are also paying close attention to the Sohn Investment Conference, where the industry’s biggest names, including prominent hedge fund managers, share their views on the economy and the markets through the rest of the year. This comes after yesterday’s shareholders meeting for the investment firm Berkshire Hathaway produced endless media coverage of chairman Warren Buffett’s comments. It’s worth noting that at last year’s Sohn event, several major money managers expressed their bullish outlook on gold. The outspoken Minneapolis Fed President Neel Kashkari will be speaking later today, as well. Aside from constantly following the Fed, the global markets will also await the Bank of England’s announcement of its current interest-rate policy on Thursday.

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.